Contingent Capital and FInancial Networks 2

Speaker: Paul Glasserman

Date: Tue, Jul 22, 2014 to Wed, Jul 23, 2014

Location: PIMS, University of British Columbia

Conference: The Economics and Mathematics of Systemic Risk and Financial Networks

Subject: Mathematics, Econometrics, Applied Mathematics

Class: Scientific


These lectures will cover two topics. The first is contingent capital in the form of debt that converts to equity when a bank 
nears financial distress. These instruments offer a potential solution to the problem of banks that are too big to fail by 
providing a credible alternative to a government bail-out. Their properties are, however, complex. I will discuss models for the analysis of contingent capital with particular emphasis on their incentive effects and the design of the conversion trigger. The second topic in these lectures is the problem of quantifying contagion and amplification in financial networks. In particular, I will focus on bounding the potential impact of network effects under the realistic condition that detailed information on the structure of the network is unavailable